The strength of a multi-asset portfolio in a volatile market environment

The war involving Iran, which began in February 2026, has evolved into a protracted conflict. The Strait of Hormuz—a vital conduit for a significant portion of the world’s energy supplies—remains severely restricted. On October 16, the price of Brent crude reached approximately $110 per barrel, its highest level since May. Iran has once again extended an offer to the United States to reopen the strait, though this proposal is contingent upon certain conditions.

The implications for monetary policy are palpable. Following a lengthy hiatus, the Federal Reserve has raised its benchmark interest rate once more, and yields on ten-year U.S. Treasury bonds have climbed above 5%. Meanwhile, the European Central Bank is maintaining interest rates at a multi-year high. This environment weighs particularly heavily on capital-intensive sectors: the real estate industry is struggling with rising financing costs, while the European automotive sector faces a dual challenge from high energy prices and weakening consumer demand. Conversely, the energy sector and defense companies—the latter benefiting from growing defense budgets worldwide—have emerged as beneficiaries.

And yet, the real economy is proving remarkably resilient. The US economy continues to grow robustly, buoyed by strong corporate earnings and the investment cycle surrounding artificial intelligence. Admittedly, concerns have recently resurfaced within the technology sector regarding the financing of multi-billion-dollar AI projects, alongside weakness in semiconductor stocks. On October 16, the Nasdaq 100 fell by approximately 2.5%, while the S&P 500 hovered just below the record high it reached in early October. For Germany, despite various headwinds, moderate GDP growth of around 1.3% is projected for 2026—supported by investments in digitalization, defense, and decarbonization. Europe’s economy as a whole is showing signs of weakness; the primary growth momentum is currently coming from the US and emerging markets.

The possibility of a classic year-end rally—or perhaps a gradual de-escalation in the Middle East before the year is out—offers grounds for cautious optimism. At the same time, high valuations, geopolitical uncertainties, and a persistently restrictive interest-rate environment call for vigilance. The markets are currently juggling multiple, complex dynamics—a balancing act that we, as investors, are monitoring with close attention.

In a challenging market environment, multi-asset strategies demonstrate their strength by allowing for flexible adjustments to varying market conditions. They enable the weighting of equities and bonds to be tailored to an investor’s risk tolerance, investment objectives, and time horizon—for instance, through a gradual reduction in equity exposure. Asset classes such as liquid alternative investments and gold also serve as a hedge against geopolitical risks, further enhancing portfolio diversification.

A modern portfolio goes well beyond a rigid split between equities and fixed-income securities, even while retaining these as core components. Given the interest rate hikes by the ECB and the Fed, as well as increased interest rate risks, we currently maintain a significant underweight position in bonds. The key lies in the ability to flexibly adjust weightings in response to changing market conditions—and as an active investor, that is precisely what we do on an ongoing basis, in your best interest.